China’s Stocks Advance After Premier Wen Signals Stimulus

Sept. 12 (Bloomberg) -- China’s stocks rose for the fourth
time in five days after Premier Wen Jiabao signaled the
government has more room for fiscal and monetary stimulus
measures to boost economic growth.

Anhui Conch Cement Co. and Sany Heavy Industry Co. led
gains for construction-related stocks on speculation they will
benefit from government spending on infrastructure. Jiangxi
Copper Co. surged 3.3 percent on the prospect the U.S. Federal
Reserve will increase stimulus by buying bonds, bolstering the
outlook for commodities demand. China Eastern Airlines Corp.,
the nation’s second-largest carrier, jumped the most in eight
months after it said it plans to raise funds from its parent.

“Expectations are coming back the government will step up
measures to stabilize growth,” said Dai Ming, a fund manager at
Hengsheng Hongding Asset Management Co. in Shanghai, which
manages $190 million. “It looks like the government has more
ammunition in hand to boost growth given recent remarks and
actions by top officials and government departments.”

The Shanghai Composite Index rose 0.3 percent to 2,126.55
at the close, as three stocks gained for each one that fell. The
CSI 300 Index added 0.4 percent to 2,320.07. The Hang Seng China
Enterprises Index of Chinese companies traded in Hong Kong
climbed 1.1 percent. The Bloomberg China-US 55 Index, the
measure of the most-traded U.S.-listed Chinese companies, added
1.7 percent in New York yesterday.

The Shanghai Composite had fallen 3.3 percent this year on
concern the government isn’t loosening monetary policy or
introducing stimulus policies fast enough to counter the
slowdown in the economy. The index is valued at 9.7 times
estimated earnings, compared with the 17.4 average since
Bloomberg began compiling the weekly data in 2006.

Wen Stimulus

China still has “ample strength” in either monetary or
fiscal domains to propel economic growth, Wen said yesterday at
the World Economic Forum in the city of Tianjin, adding the
government has 100 billion yuan ($16 billion) in a fiscal
stabilization fund.

“We will appropriately use that for preemptive policy and
fine-tuning to propel stable economic growth,” he said,
reiterating the country will continue to place more emphasis on
ensuring stable growth.

The government is trying to prevent economic growth this
year from slipping below the 7.5 percent target set in March.
Morgan Stanley today became at least the fifth bank to estimate
that growth will be 7.5 percent, the weakest pace in 22 years,
after imports slid in August and industrial production cooled.

The Federal Open Market Committee will discuss additional
measures in a two-day meeting to stimulate the U.S. economy. Fed
Chairman Ben S. Bernanke said on Aug. 31 he wouldn’t rule out
steps to lower an unemployment rate he described as a “grave
concern.”

China Eastern surged 5.2 percent to 3.46 yuan, the biggest
gain since Jan. 17. The carrier will sell 698.9 million domestic
shares at 3.28 yuan apiece and 698.9 million Hong Kong-listed
shares at HK$2.32 each to its state-owned parent to pare debts,
it said in a statement.

Party Congress

Thirty-day volatility in the Shanghai Composite was at 16.2
yesterday, compared with this year’s average of 17. About 8
billion shares changed hands in the gauge, 2.6 percent higher
than the daily average this year.

China’s impending leadership change will fail to bolster
stocks because policies will be little changed during the
initial stages of the country’s new administration, said Central
China Securities Co. and ICBC Credit Suisse Asset Management Co.

The Shanghai Composite rose an average 0.2 percent in the
month leading up to the four national congresses to elect the
top leaders of the Chinese Communist Party since 1992. It
dropped an average 14 percent in the same duration after, with a
39 percent plunge in 1992 dragging the result lower.

‘No Stock Reaction’

“History shows that there’s no major stock reaction to the
party congresses,” said Li Jun, a strategist at Central China
Securities in Shanghai. “The reason could be that top officials
are inclined to maintain stable policies during transitions.”

Party chief Hu Jintao and most of the nine members of the
Standing Committee of the Politburo are expected to hand power
this year at the 18th congress, the date for which hasn’t been
announced. The six congresses since 1982 were all held between
September and November.